You have inquired about the validity of N.C.G.S. § 90-210.25(e)(1)f, which is part of Article 13A, Chapter 90 of the General Statutes of North Carolina, governing the practice of funeral service. Specifically, that section specifies that “[t]he direct or indirect giving of certificates of credit or the payment or offer of payment of a commission by the licensee, his agents, assistants or employees for the purpose of securing business” is grounds for revocation or suspension of a license by the Board of Mortuary Science. You indicated in your letter that the Board has interpreted and applied this provision to various situations over the years in the course of its duties. Your letter expressed concern about how the provision, and the Board’s interpretations and applications of that provision, would fare under current first amendment case law such as 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) and Edenfield v. Fane, 507 U.S. 761 (1993).

First, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit fees or discounts paid to third parties for referring clients to licensees, the first amendment cases such as Liquormart do not apply. Prohibitions on licensees paying such referral fees are addressed to conduct, not to speech. These types of provisions are commonly found in various types of licensing laws and professional ethical codes, and we are not aware of any constitutional barrier to their application when authorized by statute and applied in a reasonable manner.

On the other hand, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit advertising of otherwise lawful discounts or credits through promotional materials, newspaper advertisements, or other means, then the issue would appear to be one concerning the validity of the State’s regulation of commercial speech under the First Amendment. As you mentioned, the Liquormart case struck down a complete ban on advertising liquor prices. There, the Court noted, “[w]hen a State regulates commercial messages to protect consumers from misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer information,” the purpose of its regulation “is consistent with the reasons for according constitutional protection to commercial speech and therefore justifies less than strict review.” 517 U.S. at 501.

Liquormart, however, is merely one of a number of commercial speech first amendment cases the Court has decided over the last twenty-four years, since Virginia State Bd.of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). In that case, the Court struck down a Virginia statute making a pharmacist guilty of professional misconduct if he published or advertised fees, prices, or discounts for prescription drugs. The Court expressed concern not only for the right of the pharmacist to communicate, but also for the right of the consumer to receive the communication, which in this case would be helpful information about fees. Similarly, in Bates v. State Bar of Arizona, 433 U.S. 350 (1977), the Supreme Court invalidated Arizona restrictions on lawyer advertising, in significant part because of concern about the consumer’s right to receive helpful information. In recent years, the Court has emphasized that a State which wants to ban or restrict commercial speech has a heavy burden of demonstrating the constitutional validity of the restriction. Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71, n.20 (1983); Edenfield, 507 U.S. at 770-71 Unless the speech involves illegal activity or is itself false or misleading, the State can succeed in defending its speech restriction by showing that it has a substantial legitimate interest underlying its regulation, that the restriction on the speech directly and materially advances that interest and that the regulation is “narrowly drawn.” See Central Hudson Gas & Electric Corp. v. Public Service Comm’n of New York, 447 U.S. 557, 564-65 (1980); see also Florida Bar v. Went For It, Inc., 515 U.S. 618, 624 (1995). Applying the Central Hudson test, the Supreme Court has not readily accepted states’ justifications for banning or restricting commercial speech, rejecting various restrictions on professional advertising in cases such as Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) (ban on advertisements providing advice regarding specific legal problems and on use of illustrations in advertisements); Peel v. Attorney Registration & Disciplinary Comm’n of Illinois, 496 U.S. 91 (1990) (ban on advertisements stating lawyer certifications, with narrow exceptions, as applied to lawyer certified as civil trial specialist by National Board of Trial Advocacy); Shapero v. Kentucky Bar Ass’n, 486 U.S. 466 (1988) (ban on attorneys’ targeted direct mail solicitation relating to specific events, applied to letter concerning foreclosure proceedings); Ibanez v. Florida Dep’t of Bus. & Professional Regulation, Bd. of Accountancy, 512 U.S. 136 (1994) (restrictions on listing qualifications applied to ban listing of certified public accountant credentials by an attorney); Edenfield, 507 U.S. 761 (ban on in-person solicitation by accountants). Among the few exceptions are Ohralik

v. Ohio State Bar Ass’n, 436 U.S. 447 (1978) (ban on in-person solicitation of accident victims by attorneys) and Florida Bar v. Went For It, 515 U.S. 618, in which the Court upheld a thirty-day restriction on targeted direct mail solicitation by attorneys to accident victims and persons who had lost loved ones in accidents, distinguishing the case from Shapero.1 Thus, except for attorneys soliciting accident victims, either in-person or by targeted mail during a very limited period of time, the Supreme Court has tended to conclude in most cases that the State’s interest in protecting consumers from potentially misleading or overreaching advertising did not advance legitimate State interests in a manner sufficiently related to those interests or sufficiently restricted to them to outweigh the advertiser’s right to communicate and the consumer’s right to learn about the qualifications, services, and pricing practices of the advertising professional. Moreover, the State generally can convince a court of the harms from which it seeks to protect consumers only by producing evidence of those harms resulting from the banned or restricted types of advertising, such as a study that the Florida Bar relied on in Went For It.

In sum, to the extent that the Board of Mortuary Science interprets and applies

N.C.G.S. § 90-210.25(e)(1)f to ban advertising of discounts or promotions, it can do so lawfully only under the standards set out above. If challenged in litigation, under current case law it would have to meet that heavy burden of convincing the court, presumably by producing substantial evidence, that the ban was narrowly drawn to further a legitimate interest.

We are not sure exactly how the Board has interpreted and applied N.C.G.S. § 90-210.25(e)(1)f in the past. Therefore, we suggest that the Board may want to review the statute itself, the rules of the Board interpreting the statute, and the past applications of both the statute and any relevant rules by the Board. If the Board lacks rules reflecting its interpretation of the statute, it will need to adopt appropriate rules to support its interpretation or, if the statute does not support that interpretation, seek legislative amendment. Further, if it appears that the Board may have difficulty supporting its interpretation in court in the event of a first amendment challenge, the Board may want to reconsider its interpretation and adjust its rules accordingly or, in the event the problem appears to be with the statute itself, seek statutory amendment

We hope this advisory opinion provides assistance to you. Please let us know if there are further questions about this matter.

Signed by:

Ann Reed Senior Deputy Attorney General

Charles J. Murray Special Deputy Attorney General

Norma S. Harrell Special Deputy Attorney General

1 Significantly, lower courts have concluded that Florida Bar v. Went For It cannot be extrapolated to uphold other time-limited bans. For example, the United States Court of Appeals for the Fourth Circuit held that Maryland could not impose a thirty-day ban on targeted direct mail solicitation to persons involved in or suffering an accident or disaster or charged with crimes or traffic offenses, in part because those persons often needed legal services promptly. Ficker v. Curran, 119 F.3d 1150 (1997).